Pilbara Minerals CEO: Beware the short squeeze, prices can turn quickly

hello and welcome to market index and lifei Market c s coverage of reporting season my name is Kyle Kinga and I have the pleasure of chatting today with the pill mineral CEO Dale Henderson Dale thanks so much for joining us today thanks go D your company has just reported its first half results what would you say the most pleasing aspects of the company's performance in this period Well it's been a great half strong operating performance and all major projects basically on track schedule and cost so yeah really fantastic half in terms of what we can control of course it's been in a softer pricing uh environment but in terms of what we can control yeah we're really happy yeah um look you mentioned what you can control you mentioned prices and so much has changed in your industry since the start of this reporting period is there anything uh maybe the company missed or or didn't achieve in terms of the goals you set out with on the 1st of July 2023 no we're we're pretty happy with how we go going um yeah coming into this financial year was all about um building the base building uh building out our production capacity uh so very much projects whilst of course continuing to deliver lowc cost tons Etc that's all gone well so pretty happy with um how we're traveling one of the biggest stories in global commodity markets over the last 12 13 months of course is the fall in the lithium price I've seen many research reports which suggest we're pretty close to a but also a couple that predict maybe we could get down as low as us $600 a ton for spaming concentrate if that were to occur how would pill minerals manage that sort of price volatility yeah sure so there's plenty of speculation as to what does the outlook look like what excites pillur is and always has excited us it's a long-term Prospect for the industry uh the Grassroots investment um is still incredible globally so we're keeping our eyes trained on on that prize and hence getting on with the job in terms of building out building up the base so we're looking through the short-term volatil and price pricing for this long-term opportunity and if history is anything to go by it could go very well for pbra pilra has been um in this new industry a little bit longer than most uh we've had the challenges of a low uh cost environment previously we then swung out of that environment having build out production capacity previously it was through the alur acquisition um but we had the the perfect storm in terms of increased production capacity moving into a high priced environment so the last two years have been uh for a lot of our shareholders just a fantastic period we're nowar in a period where lower pricing granted but as we say the long-term trajectory looks pretty positive so we like the idea of continuing to build up at our production capacity and maybe we'll have Deja Vu who knows but we like the idea of more production capacity improve pricing and um and P shareholders should should benefit from that you're still very much a one asset one commodity company and let's face it pilg g is a world-class asset uh but is this something that concerns you uh are you looking to address this issue of diversification yeah look diversification it's part of our strategy we we describe it as a sort of a fourth plank to our strategy and and often characterize it as a distance forth and and the reason we call it distant is our priority around expanding our base asset is the quickest route to create more value uh for our shareholders given the the great asset that you mentioned and the ability to to exploit we think this incredible Market which is infolding so that has um the priority and certainly the weight of the business's Focus that being said your diversification it makes good sense for p to look to diversify in time if and when the right creative extensions are identified um as to where and what they are well um that's all questions for another day but uh as I say priorities really on the base it for now yeah well in terms of where and what they are I might try and get the question in today if you don't mind um but look it's not just lithium that's impacted by the current cycle um many many commodities prices have fallen um and it it tends to be a bit of a double-edged sword because you have companies like your own which as you say have been around a long time it's not your first rodeo in terms of dealing with these low prices and you've got you know a good asset and and a lowcost asset on the other hand you've got companies and they're probably too numerous to mention in this interview who are struggling yeah um are you seeing substantial mispricing of assets not just assets but potentially going concerns uh in the Market at the moment and are you actively looking to pursue these opportunities yeah yeah it's hard to make a comment on particular assets without getting into the specifics sure um but I think I can generally say we had a period of of lithium fever I think um and and no surprise given the very strong pricing a lot of groups looking to enter and ify way shape and form into the industry and I think through that sort of chapter there has been some assets and businesses which have been overpriced and now we're entering a different phase one in which there's been some resets I think emerging um now does that present an opportunity for pilra well potentially but it depends on which asset and where but yeah as I say for us uh really focus is carry on with the job lowcost operation build out the base see through the short-term volatility for the longer term prize so um that's what sort of Garners our Focus yeah uh we do uh a market index we do a weekly short seller report right so we just get the a data and we list them from top to bottom now pill minerals has been on the top of that list for a substantial period of time uh do you have I know you've made some pretty spicy comments towards short sellers uh do you have any com any further comments for the short sellers after today's results yeah not not really I mean um as you you may have heard as as it relates to our short position you being uh top of the podium is obviously not what we aspire to be for the short list um but as as it relates to to lithium we're not alone I mean we're the largest lithium pure play on the A6 so we do kind of stand out what we hear is those short sellers are applying their expectation of the market movement not so much uh P's business performance and as I say we're not alone and when we look to other markets some of the US markets and other um lithium Centric businesses are some of them are are fairly shorted so we're in good company so um we know it's not so much a pilra thing it's more of an industry IND thing so that's one one key distinction uh the key thing I've really spoke to in this space is I've used the word it's Brave to to to take a short position in the sense that this industry is Young it's growing quickly and it's had a tendency to surprise and we have seen in particular price movements move historically very quickly very rapidly and if if if what's occurred in the past happens again that could create a situation of of a very strong short Square so any short seller should be cautious of that Dynamic and and of course cautious to bet against pilra you know we're very focused on delivering well you know we we think we've got this fantastic asset proudly great hom gr Australian company um we we want to continue to extend our position so we're incredibly focused on on delivering well so and we look forward to creating more value for our shareholders yeah no doubt the shorts are listening uh Dale if you permit me I through the um the prospect of interviewing you today out to my Twitter followers and I've got a substantial U number of let's call them pil Fanatics that do follow me um and you know it is a very popular company uh both among my followers but also on the livey market index platforms it's one of the top five searched companies uh so the top questions that came through for you from the pill of Fanatics uh by Far and Away the biggest one was dividends sure okay so obviously you've we know no dividends for f524 you've discussed some of the reasons why but can you tell us when you think they might be coming back yeah it's yeah no appreciate the question yeah dividends it's it's a function of our Capital Management framework and uh which which sets out effectively how excess proceeds can get channeled which of course return to shareholders is one of them and yeah we got thrust into to dividends fairly quickly in the in the in the growth journey of the business which was a fantastic thing given the the the strong pricing environment we found ourselves in it made good sense to um get some dividends done and out the door and great to give back to many of those sh shareholders many of whom have supported us through the tough times so that was fantastic obviously the pricing period we we're moving through the moment that's come back um so the margins have have decreased hence we we we' uh taken the decision to to not uh effectively pay pay dividends in this environment but what we are doing is continuing to build out the base because we actually think the best use of our shareholders capital is putting it back into the ground increasing the base asset expanding and extending our position between us in our competition such that when uh improved pricing returns well we'll have a a larger production base and if that's Times by some really strong pricing well I like the idea that we'll have more dividends to pay back and due course sure um you mentioned obviously building out the base and uh you have said uh in your analyst interview that there's no plan to cut production anytime soon the goal is is to get it out of the ground and get it to customers uh but again followers are they want to know not so much about production Cuts but what price would you start to um perhaps not ramp up continue to ramp up that where would where is there a point where you would just tail off yeah sure so the way the way we think about this is um and in the first instance what's the benefits of continuing to carry on with the expansion and with that there's there's quite a few building out the base um supports us in a couple of ways one it reduces our our operating cost so that makes good sense uh two it obviously positions us with a much larger production profile so such that if pricing returns and I mentioned sometimes pricing turns quite quickly well we'll be in a position to yield the benefits of that so so creating that opportunity um is important to us and the third piece which is more of a practical element is we're well into construction concrete's coming out of the ground and and the photos we we showed uh today on our release sort of show it's literally coming out of the ground so those couple of things sort of um guide us to carry on with that but let's just say we've done the bill uh what do we do then let's just say pricing is muted well we still have available the ability to moderate production if we chose to we could potentially scale back the outright produced tons if we chose to and reoptimize the mine plan so those levers are still available to us and uh we we'll retain those levers if if pricing got low enough well of course we could deploy that but we don't see any reason to consider any of those at this point in time and I would just add this these set of levers we've been here before you know the price decline we had through um uh 19 2019 2020 well we had to pull all of those levers so we have the Playbook it's not our first rodeo we've got our eyes trained on the prize and uh it's onwards and upwards yeah um the final question which I thought was perhaps the most interesting one um people want to know about how you feel about uh unconventional unconventional Supply coming out of China possibly one of the big reasons for the current Supply but also uh other lithium extraction Technologies there's hydrogen there's different battery chemistries is this something that you know you're keeping an eye on it P yeah we do keep an eye on and it's a big it's a big question to finish um on um and I'll offer a couple of comments about lithium and then maybe other Tech in in the in the case of of lithium as you know the world needs a lot of lithium um there's few raw material sources to come from um there's hard rock there's um uh clay and brines principally and in the Hard Rock space of the available mineral types spine or pigmenti is actually the best source actually holds the highest concentration of of lithium units of any other rock type and that's why Hard Rock and brine's traditionally have been pursued not clo and certainly not lipolite but when lipolite holding a very low percentage of Lithia so as it relates to these sources of of lipidia lithium units the higher cost because of their lower concentration and uh because of that they any Supply from that will fill out the right hand side of the supply curve so that's that's what we believe to be true and frankly the the talk of some of these mines being turned off at current pricing I think is evidence of that so that's what I'd say about lithium as it relates to other Tech um yeah of course we keep our eye on it but um we have a high level of confidence around um around the lithium iron supply chain for a couple of reasons one one is the buildout investment is immense so um a lot of companies um uh all through the supply chain are effectively committing to that now and it's well underway the second thing is lithium onon battery chemistries a very mature uh it's a battery type invented in the 1970s was perect perfected through camcorders that type of stuff long before um Elon put it into a car um etc etc so it's had that type of Runway and now it's in a point where it's getting scale and all of that plays through to an efficiencies reduced cost so it'll be hard to displace there isn't an obvious competitor at this point and I would add one other fact that I think the lithium iron battery type is particularly good for e-mobility it's got that right combination of cost Energy Efficiency uh particularly recharge discharge efficiency so some of those things which make it hard to displace so do I think other Tech will come in time it will but it's hard to see anything coming too quickly so long answer but hopefully that that covered the base it's a big question no so it's a great response to Dale Anderson thanks so much for your time today really appreciate it thank you and if you liked that interview make sure you hit the Thumbs Up Button don't forget to subscribe as well to stay notified of all of our future updates

Channel: Livewire Markets

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Id: baVt4a44XfQ

Length: 15min 28sec (928 seconds)

Published: Fri Feb 23 2024